CreditorWatch’s data for the last month of 2020 found that over three quarters of industry groups had reported a reduction in payment times.
The transport, postal and warehousing sector saw the biggest change with a 53 per cent reduction in payment times, with retail recording the next biggest fall at 31 per cent following strong trade in the build-up to the festive season.
Despite the improvement, external administrations rose by 23.4 per cent in December, following a 4.4 per cent rise in November, foreshadowing a spike in insolvencies in the new year.
“The reduction in payment times reflects better economic conditions at the end of 2020. However, lockdowns and border closures at the end of the year due to COVID have the potential to stymie this,” said CreditorWatch chief executive Patrick Coghlan.
“It is yet to be seen whether the pattern of insolvencies will be orderly, sporadic or volatile, but it appears we are not headed for a steep cliff of business failures, which are likely to take time to feed through the system.
“What’s key is for businesses to work with experienced advisers and start to negotiate with creditors now. That’s going to be the best way to continue trading even through difficult economic periods. Insolvency is not inevitable.”
Mr Coghlan also believes court actions against insolvent businesses and defaults are likely to pick up again following annual drops of 39 per cent and 45 per cent, respectively.
“But there’s a lot of potential for a quick recovery, similar to that experienced in the middle of 2020 when the original lockdowns were removed,” he added.
“Sectors such as accommodation and food services could demonstrate a strong comeback when existing restrictions and border closures are put to bed.”